Han Products manufactures 29,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is:

Direct materials $ 4.00

Direct labor 7.00

Variable manufacturing overhead 2.30

Fixed manufacturing overhead 12.00

Total cost per part $ 25.30

An outside supplier has offered to sell 29,000 units of part S-6 each year to Han Products for $41.50 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $712,800. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.

Required:

a.

Calculate the per unit and total relevant cost for buying and making the product? (Round your "per unit" answers to 2 decimal places.)

Per Unit Differential Costs 29,000 Units

Make Buy Make Buy

Cost of purchasing

Cost of making:

Direct materials

Direct labor

Variable overhead

Fixed overhead

Total cost

b.	How much will profits increase or decrease if the outside suppliers offer is accepted?

Profit would _____________ by _____________